Sovereign wealth fund Temasek is said to be looking to raise $80 million from private equity funds for its portfolio company, the Indian agricultural warehousing company Star Agriwarehousing and Collateral Management (Star Agri).
Also backed by Indian alternative asset investors IDFC Alternatives, Star Agri is looking to finance an expansion of its warehousing network in India and overseas, as well as capitalise its financing business, according to a report in The Hindustan Times.
It is thought that the fundraising talks began several months ago, and could result in Temasek taking on a larger tranche of the Indian company. Fundraising is like to have closed by the first quarter of the next fiscal year.
Star Agri executive director Amith Agarwal told Delhi’s The Economic Times last week that IDFC Alternatives would sell a portion of its stake to Temasek in Star Agri for 750 million rupees ($11 million; €10 million). The asset manager invested 1.5 billion rupees in Star Agri in 2012.
“The recent transaction is largely a secondary transaction providing part-exit to IDFC and a small amount of capital coming into the company as primary equity from Temasek,” said Agarwal told The Economic Times, adding that this transaction was a tranche and part of the company’s 2014 deal with Temasek.
The deal gave IDFC a 2x return, according to The Economic Times, and leaves the asset manager and Temasek collectively holding 47 percent of Star Agri. The founders hold the remainder.
In 2014, Temasek invested 2.5 billion rupees and opened its first international office in Singapore with the subsidiary Star Agri Services. It has also begun offering financial services.
Agri-commodity warehousing firms in India have grown quickly in recent years by branching out into financial services and on the back of a national agricultural commodities warehousing shortfall.
“Poor front-end infrastructure, such as storage facilities, improper warehousing facilities, redundant food processing technology and farmers’ inaccessibility to value-added services, results in wastage of 40 percent of the fruits and vegetables” in India, according to a 2013 Ernst & Young and the CII Institute of Logistics report.
A 2014 Knight Frank report said the need for warehousing space in the country would grow “at a compounded annual growth rate of 9 percent from 919 million square feet in 2014 to 1,439 million square feet by 2019.”